Ascendis Pharma A/S Q2 FY2022 Earnings Call

Good day and thank you for being here. Welcome to the Ascendis Pharma Second Quarter 2022 Earnings Conference Call. Please note that today's conference is being recorded. I will now turn the conference over to Mr. Tim Lee, Senior Director of Investor Relations for Ascendis Pharma. Please proceed.

Thank you, operator, and thank you everyone for joining our second quarter 2022 financial results conference call today. I am Tim Lee, Senior Director of Investor Relations of Ascendis Pharma. Joining me on the call today are Jan Mikkelsen, President and Chief Executive Officer; Scott Smith, Senior Vice President and Chief Financial Officer; Dr. Dana Pizzuti, Head of Development Operations and Chief Medical Officer; Dr. Stina Singel, Head of Clinical Development Oncology; and Joe Kelly, Head of U.S. Commercial Endocrinology. Before we begin, I would like to remind you that this conference call will include forward-looking statements that are intended to be covered under the Safe Harbor provided by the Private Securities Litigation Reform Act. Examples of such statements may include, but are not limited to our U.S. commercialization and continued development of SKYTROFA for the U.S. market, the commercialization of TransCon hGH for the EU market, our progress on our pipeline candidates and our expectations with respect to their continued progress, statements regarding our strategic plans, our goals regarding our clinical pipeline, including the timing of clinical results, statements regarding the U.S. market approval of SKYTROFA and our product pipeline candidates, statements regarding our planned filings, our expansion into new therapeutic areas, and statements regarding our ability to create a sustainable leading global biopharma company. These statements are based on information that is available to us today. Actual results and events could differ materially from those in the forward-looking statements, and we may not be able to achieve our goals, carry out our plans or intentions or expectations or projections disclosed in our forward-looking statements, and you should not place undue reliance on these statements. Our forward-looking statements do not reflect the potential impact of any licensing agreements, acquisitions, mergers, dispositions, joint ventures, or investments that we may enter into or terminate. We assume no obligation to update these statements as circumstances change, except as required by law. For additional information concerning the factors that cause actual results to differ materially, please see our forward-looking statements section in today’s press release and the Risk Factors section of our most recent annual report on Form 20-F filed with the SEC on March 2, 2022. TransCon Human Growth Hormone or TransCon hGH is approved by the FDA in the U.S. under the brand name SKYTROFA for the treatment of pediatric patients 1 year older weighing at least 11.5 kilograms and experiencing growth failure due to inadequate secretion of endogenous growth hormone. In addition, the European Commission has granted a marketing authorization for lonapegsomatropin, Ascendis Pharma developed under the name TransCon hGH as a once-weekly subcutaneous injection for the treatment of children and adolescents aged 3 to 18 years with growth failure due to insufficient endogenous growth hormone. In general, we refer to this product as TransCon hGH unless we are referring to the product in the context of particular jurisdictions such as the United States or the European Union. Otherwise, please note that our product candidates are investigational and not approved for commercial use. As investigational products, the safety and effectiveness of the product candidates have not been reviewed or approved by any regulatory agency. None of the statements made on the conference call regarding our product candidates should be viewed as promotional. On today’s call, we will discuss our second quarter 2022 financial results and provide further business updates. Following some prepared remarks, we will then open the call for questions. I will now turn the call over to Jan Mikkelsen, President and Chief Executive Officer.

Thanks, Tim, and good evening everyone here from Copenhagen. With our recent clinical and regulatory progress for TransCon PTH and the commercial progress for SKYTROFA, we continue to work towards fulfilling our Vision 3x3 to become a sustainable, profitable leading biopharma company. For TransCon PTH, we have reported positive Phase 3 data, which met the composite primary endpoint and all key secondary endpoints, highlighting its potential to address a major unmet medical need for adult patients with hypoparathyroidism. After a positive and constructive pre-NDA meeting with FDA, we are on track to submit regulatory filings in the U.S. in the coming weeks and during Q4. This year, we continue to advance our goal of making SKYTROFA the leading product in a growing growth hormone market, and we are planning to launch SKYTROFA in Europe next year. We have now achieved successful Phase 3 results for two independent product candidates in a row and continue to see highly consistent clinical trial outcomes across multiple bases and populations. We believe that we are well positioned to drive sustainable, long-term growth with three additional independent clinical product candidates in rare disease endocrinology and oncology that utilize the same algorithm for innovation that we used for SKYTROFA and TransCon PTH. We believe that we are on track to become cash flow positive, given our strong cash position of around €1 billion, combined with the expected revenue from SKYTROFA in the U.S. and the expected U.S. launch of TransCon PTH in the middle of next year. Now, let me update you on each of our programs. For TransCon Growth Hormone marketed as SKYTROFA in the U.S., our commercial strategy is to build SKYTROFA into the leading growth hormone product in value, while growing the overall value of the growth hormone market. Our once-weekly SKYTROFA is differentiated from other once-weekly growth hormone products in multiple ways that reinforce its value. SKYTROFA is the only once-weekly product that delivers unmodified growth hormone, thereby maintaining the same mode of action as daily growth hormone. In addition, it’s the only product that allows for temperature storage without preservatives and with clear visible evidence for patients and caregivers that the injection has been delivered. I am also proud to share with you that the SKYTROFA Auto injector was awarded the Pharmapak 2022 Patent Century Design Award. This prestigious award recognizes pioneering drug delivery solutions that have significantly contributed to improved design, innovation, patient experience, and ease of use. This changed the U.S. commercial leadership in May, and the new leadership immediately implemented improved commercial tactics for SKYTROFA. One of the goals behind these changes was to increase conversion of prescriptions to paid reimbursed therapy. We have already seen the benefits of this input, with more than doubling sequentially, resulting in a reported revenue of €4.4 million in Q2 compared to €1.9 million in Q1. Nearly half of Q2 revenue was generated in the month of June alone. We have also seen an increase in the number of SKYTROFA prescriptions written for new patients, now totaling more than 1,700 at the end of Q2. A typical prescription lasts for 1 year, which is an increase of 75% compared to Q1. With these improved commercial practices, we believe we are on track to achieve the current 2022 full-year Ascendis compiled sell-side analyst consensus SKYTROFA revenue estimate of around €25 million. We continue our efforts to build TransCon Growth Hormone into a leading global product with a global Phase 3 adult growth hormone deficiency trial in Japan and a Phase 2 pediatric growth hormone deficiency trial planned. Let us now turn to TransCon PTH, potentially our most valued product candidate in the endocrinology rare disease pipeline. Redesigned TransCon PTH is designed to release PTH at physiological levels over 20 hours to deliver the missing endogenous PTH. We believe that TransCon PTH has the potential, if approved, to become the first hormone replacement therapy to address the underlying cause of this disease. For this reason, we believe that TransCon PTH is the only product candidate that can credibly and completely address this more than $5 billion market opportunity. The results from our Phase 3 trial, which met the composite primary endpoint and all key secondary endpoints, along with our Phase 2 trial support our belief in this potential. Even more promising, 57 out of 59 patients continue in the open-label portion of the Phase 2 trial after 2 years of treatment, and 78 out of 79 patients continue in the open-label portion of the Phase 3 trial. All of this reinforces our belief that this product candidate is having an ongoing impact on these patients’ lives. These positive results were consistent across TransCon PTH treated adult patients, independent of their disease spectrum or conventional therapy dosed at baseline, which gives me comfort that basically all adult hypoparathyroidism patients have the potential to benefit from treatment with TransCon PTH. With this long-term and pivotal data in hand and our planned NDA submission in the coming weeks, we are focusing on preparation for the expected U.S. approval and launch in mid-2023. We identified three segments within the estimated 70,000 to 90,000 patients with chronic hypoparathyroidism in the U.S. The third segment consists of adult patients in the U.S. previously or currently treated with short-acting PTH preparations, most of whom no longer have access to this treatment because of the recall of Natpara in the U.S. This patient group, we believe, can be the early adopters of TransCon PTH as they have previous experience with PTH treatment. The second segment consists of chronic adult HP patients currently on conventional therapy with active vitamin D and calcium supplements who remain PTH treatment-naïve. In this segment, we will focus on building awareness among patients, providers, and the healthcare system to understand the clinical value of TransCon PTH treatment. The first segment consists of newly diagnosed adult patients with chronic HP. Patients in this group often develop chronic HP as a result of surgeries or therapies that result in the removal or damage to the parathyroid glands. In addition, we plan to explore the potential benefit of TransCon PTH more broadly in post-surgical settings and pediatric patients in future clinical studies. Expanding global reach for TransCon PTH, we expect potential approval in the EU in Q1 2024, followed by a launch shortly thereafter. For Japan, we plan to report top-line results for our Phase 3 pathway Japanese trial in the fourth quarter of this year. Switching now to TransCon CNP, the ACcomplisH trial, our Phase 2 randomized, double-blinded, placebo-controlled clinical trial of TransCon CNP in children aged 2 up to 10 years continues. We are pleased to report that we continue to see a well-tolerated safety profile, and all patients continue in their trials, with the longest treatment duration now about 2 years without any dose reduction or discontinuation. All patients in the open-label extensions are now on a 100 microgram per kilogram per week dose. We look forward to sharing the top-line results from the double-blinded placebo-controlled part of the ACcomplisH trial and the open-label extension results during the fourth quarter of this year. We are planning to submit a new protocol to our IND in the U.S. and submit Clinical Trial Applications in countries in the EU in Q4 this year in order to initiate a new global randomized double-blind placebo-controlled Phase 2 trial in achondroplasia patients down to the age of 2. The trial is expected to enroll around 80 patients, with annualized growth velocity as the primary endpoint. We expect to have top-line results from this clinical trial in 2024. With this, we believe that we remain on track for our overall Vision 3x3 growth of obtaining approval for three endocrinology rare disease products by 2025. Turning now to oncology. Based on our recent progress, I am more and more convinced that we can make a paradigm shift in the treatment of cancer due to our unique TransCon technologies. The TransCon TLR7/8 agonist is designed to activate the immune system inside the tumor. Our technology provides sustained release of the TLR7/8 agonist, thereby activating the immune system without systemic toxicity. Enrollment continues in our Phase 1/2 trial of TransCon TLR agonist therapy alone and in combination with a checkpoint inhibitor in patients with solid tumors who have failed prior lines of therapy. The trial continues to show that TransCon TLR agonist is well-tolerated as a monotherapy or in combination with a checkpoint inhibitor, consistent with low systemic exposure of TLR7/8 agonists and demonstrating clinical evidence of anti-tumor activity as monotherapy or in combination with a checkpoint inhibitor. Our TransCon IL-2 beta/gamma product candidate is designed to broadly increase the systemic stimulation of anti-cancer immunity and become a new backbone for cancer immunotherapy. The Phase 1/2 dose escalation and dose expansion trial continues to evaluate this product candidate alone or in combination with a checkpoint inhibitor or chemotherapy in patients with solid tumors who have failed prior therapy. During the second quarter, we dosed our first patient in the combination of TransCon IL-2 beta/gamma and a checkpoint inhibitor. The Phase 1/2 trial continues to show that TransCon IL-2 beta/gamma is well-tolerated as monotherapy or in combination therapy. To date, we have seen dose-dependent increases in absolute lymphocyte count, along with increases in cytotoxic CD8 positive T cells and NK cells without an increase in eosinophils, indicating the designed bias towards beta/gamma activity. There have been no dose-limiting toxicities reported to date, and we continue with dose escalation. I will now turn the call over to Scott for additional details and a financial review before we open for questions.

Thanks, Jan. As Jan noted, we are in a very strong position to achieve Vision 3x3 to become a sustainable cash flow positive biopharma company with the U.S. commercialization of SKYTROFA, near-term regulatory filings for TransCon PTH, and nearly €1 billion on hand. Reported U.S. SKYTROFA revenue for the second quarter more than doubled sequentially to €4.4 million from €1.9 million in Q1. Growth in SKYTROFA revenues reflects the strong increase in reimbursed demand, and we continue to see robust increases in cumulative new patient prescriptions as summarized in the press release. Based on the increasing success rate of patient reimbursement and our continued momentum in gaining prescriptions, I want to reiterate Jan’s comments. We believe we can achieve the current Ascendis compiled sell-side analyst consensus estimate of €25 million for the full year 2022 SKYTROFA revenues, which consists of 14 publishing analysts. Now turning to operating expenses. Research and development costs for the second quarter were €90.4 million compared to €83.3 million during the second quarter of 2021. This reflects ongoing normalization of our overall R&D cost structure as more programs progress from early through late-stage development and approval. Selling, general and administrative expenses for the second quarter were €56.6 million compared to €35.3 million during the second quarter of 2021. These expenses primarily reflect higher commercial costs in the U.S. following the launch of SKYTROFA. Finance income for the second quarter was €71.1 million, which includes a net foreign exchange rate gain of €30.6 million related to the translation of our U.S. dollar holdings of cash, cash equivalents, and marketable securities and our U.S. dollar-denominated convertible senior notes to euro, and a non-cash €39.3 million gain from the remeasurement of the conversion option embedded in the convertible notes. Finance expenses for the second quarter were €9.3 million, primarily related to amortization of transaction costs and interest expenses related to our convertible senior notes. In future quarters, the following items related to the convertible notes will continue to impact finance income and expenses. First, remeasurement of the U.S. dollar-denominated convertible notes from U.S. dollar into euro. Second, remeasurement of the conversion option embedded in the convertible notes, which IFRS accounting rules require us to remeasure on each reporting date. Third, interest expense related to the cash coupon, and finally, amortization of costs from issuing the convertible notes. Overall, we had a net loss of €81.3 million or €1.46 per basic and diluted share, compared to a net loss of €134.4 million or €2.50 per basic and diluted share during the second quarter of 2021. We ended the second quarter with cash, cash equivalents, and marketable securities totaling nearly €1 billion, which we believe will enable us to become cash flow positive. Turning to the remainder of 2022, we expect our operating expenses to increase modestly as our pipeline matures and as we prepare for anticipated product launches. Let me now also provide you an update on timing for select milestones for the remainder of the year. For TransCon PTH, we’re on track for a planned NDA submission this quarter and a planned European submission in Q4. And for Pathway Japan, top-line results are expected in Q4. For TransCon CNP, we look forward to sharing the top-line results from the double-blind placebo-controlled period of the ACcomplisH trial and the open-label extension results during Q4. We plan to submit regulatory filings in Q4 for a new randomized, double-blind placebo-controlled Phase 2b trial in children with achondroplasia. For TransCon TLR7/8 agonist, top-line monotherapy and combo therapy dose escalation data from the Phase 1/2 TRANSCEND IT-101 clinical trial are expected in Q3. For TransCon IL-2 beta gamma, monotherapy top-line results are expected from the Phase 1/2 BELIEVE trial in Q4. Within oncology, we expect to submit an IND or equivalent for a Phase 2 cohort expansion in order to evaluate the combination of TransCon TLR 7/8 agonist and TransCon IL-2 beta/gamma therapy in Q4. Finally, we plan to announce our third therapeutic area at the end of the year. As you can see, it’s a busy second half of the year for Ascendis with key catalysts across the pipeline, both in endocrine rare disease and oncology. As Jan noted, with approximately €1 billion on our balance sheet, we have the capital to fund our growth initiatives, and we are positioned to fulfill Vision 3x3 and be cash flow positive. With that, operator, we are now ready to take questions.

Your first question comes from the line of Jessica Fye from JPMorgan. Your line is open.

Hey, guys. Good afternoon. Thanks for taking my questions. I have one high-level question and then a few specific ones. First, what are the PTH and/or SKYTROFA assumptions that are embedded in your expectation to become cash flow positive? And just to confirm, should we take that to mean you expect to become cash flow positive without the need for additional capital? Maybe I’ll stop there and come back with the other product-specific ones.

Thanks, Jess. We are in a unique position at Ascendis. During the last years, we have built up a unique pipeline of five independent product opportunities, each of them with significant potential. What is unique to the pipeline is that we believe we can make it extremely successful. We have not failed in a single clinical trial yet. We have managed to move each product opportunity forward from preclinical stages to getting SKYTROFA approved in both Europe and the U.S. We have moved TransCon PTH from preclinical to a positive Phase 3 trial, and we now expect to file in the next weeks here in the U.S. Focusing on these two product opportunities, we plan to be profitable and cash positive. There are two different elements to this: it’s like a bucket. You fill the bucket with some water, and then you have holes through which it runs out. We started with €1 billion of water now, and we expect to fill it further with revenues from SKYTROFA in the U.S. and our expected launch of TransCon PTH next year. Additionally, we have a mature pipeline and do not expect increasing R&D expenses as we are taking products out nearly in the same stage as we are bringing them in. This is why Scott and I, the management team, and everyone feel confident that we can reach profitability with our current €1 billion cash.

I don’t have anything to add to that, Jan. That was right.

Great. The other one I had was just – how many of the 1,707 patients who have gotten SKYTROFA prescriptions have received a pen or started taking SKYTROFA at this point? And then switching to CNP, what do you expect to learn from the accomplished data and the open-label extension data that will become available in the fourth quarter? And I’m also curious about your thoughts on the fact that now two other agents in the space have had a tough time detecting an efficacy signal in kids under age 5. What proportion of the kids in your accomplished trial are under age 5?

Yes. Those are a lot of questions. Let me start with the last part because – and I can remember most of the questions here until late Copenhagen hours. But I believe you need to think about how we define our treatment groups. We designed to ensure the expected strength of our product opportunity, and we did it in a way where we were double-blinded and had an internal placebo control, where we randomized each of the four cohorts. So we basically have the same amount of placebo as we have treated patients in each arm. This is different from others who are trying to compare to historical data or pretreatment outcomes. Our approach will allow us to have a year’s worth of well-controlled data in a double-blinded trial with about 10 to 12 patients in each arm. We believe that we have such a strong product opportunity that we can see an effect. What we will do is share all the data in Q4 so you can make an informed decision about the strength of this product opportunity, how it can really help the patient. We will show you the annualized growth rate of each cohort and will compare it to placebo. We will provide absolute values so you can make real adjustments. It’s important to show you the safety profile, as this is a priority in the pediatric segment. We have patients who have been in the trial for more than 2 years with no dropouts. This gives me comfort in this treatment. Also, we will have data on the treatment mechanism and the expected outcomes. This is why we are excited about CNP.

Your next question is from Josh Schimmer from Evercore. Your line is now open.

Thanks for taking the question. A couple of questions about SKYTROFA. First, in terms of access dynamics and parameters, can you give us a sense of the percent of targeted covered lives that are able to access SKYTROFA, there is a front-line option or a switch option without any step edit requirements? And we’ve also heard some concerns about the device potentially jamming at times. Maybe you can help quantify the rate at which that is occurring and whether there are any mitigation steps to correct that, especially as Novo Nordisk may be launching a once-a-week competitive device as well. Thanks so much.

Yes. Thanks. Let me start on the last question, which is always easier for me to remember. Scott, you can address the first one. Let’s talk about the SKYTROFA device. When you talk about the device, you discuss how you treat the patient and basically have a treatment option for them. We developed SKYTROFA and its auto-injector, which was awarded because of its patient-friendly design, showcasing how we achieved our goals. One of the unique aspects we built into this auto-injector is room temperature stability, which has driven SKYTROFA’s leadership in the daily growth hormone market because it alleviates the burden for patients or caregivers in needing to maintain a cold chain. We are monitoring complaints actively about any issues in the market. Now we have about 1,000 patients in treatment. I can tell you that I am not getting any data indicating that we have problems with the auto-injector. When I check the complaints data, I have no indication of issues. Sometimes perceptions are stronger than reality. I am not seeing problems in the data. Now regarding the first question, we are reporting that about 5-7% of U.S. life covered lives have access. This is a diverse positioning, and we are seeing changes day by day as our commercial team works with market access to optimize access to SKYTROFA for patients and physicians. Scott, any additional comments?

Yes. I would just maybe augment that by saying there is a variety of coverage. We believe that our formulary positioning is in line with our goal of preserving and growing this market value, specifically for our SKYTROFA product, which we believe is a premium offering.

One of the key elements is that you can have different kinds of strategies regarding a brand, like SKYTROFA, and we want to have an overall strategy. We believe we have a best-in-class product opportunity, and the properties that we have with SKYTROFA provide the endocrine benefits that patients deserve. What we see is that when we position it in the market, we have two goals: to be number one in value in the U.S. market and to ensure the overall growth hormone market grows. By providing a better treatment option, we hope to elevate the market from the current 1-3% growth to higher levels because we are providing a better treatment. From the societal perspective, this will eventually benefit everyone. This is why we believe our market access strategy is centered around these two elements. Joe, would you like to add anything?

Yes. Thanks. I’d just like to reinforce our strategy around gaining profitable access for SKYTROFA. We are executing this and have made tactical adjustments by reallocating resources to capitalize on access opportunities. We’re also reinvesting in areas that we see potential to improve reimbursement rates. In June, we saw revenue representatives for half of our Q2 total, exemplifying our approach working well, and we’re just getting started.

Okay. Thanks very much.

One thing I would like to emphasize is that in the last two quarters, we have doubled revenue from the last quarter to this quarter. Our goal is to keep doing that. This is how we want to build the brand. I believe Joe and the entire commercial team are dedicated to making it happen, as patients in the U.S. with growth hormone deficiency deserve to have the treatment option of SKYTROFA and reap the benefits of this treatment.

Your next question is from the line of Tazeen Ahmad from Bank of America. Your line is open.

Hi, good afternoon. Thank you for taking my question. Jan, I just wanted to get your thoughts on the competitive landscape for achondroplasia. We know about the competitive advantages your products would have potentially on dosing and frequency. But I also wanted to get your thoughts on BridgeBio, which recently showed some early-stage data for an oral molecule they are developing. It’s early, of course, and they would still be several years behind. But I guess, in theory, how do you view the potential profile of an orally delivered drug if its efficacy is somewhat comparable to your proposed weekly injection? Thank you.

It's not really my job to make comments about another company’s product, but I’m willing to share my personal analysis of the entire competitive landscape. First, fundamentally from a scientific perspective, product opportunities and modes of action lead to clinical outcomes, independent of how clinical trials are conducted. My observation is that this is an oncology stock positioned for pediatric indications. I need to see convincing data that demonstrates it is a safe product, as safety is paramount for me. As for the data, I've seen many reports of annualized growth velocity over various timeframes, which lack context and background for meaningful analysis. For me, I have no evidence indicating whether this product works or not because I cannot judge it adequately. Safety is non-negotiable in pediatric achondroplasia patients. Whatever else is talked about, safety cannot be compromised. Our CNP pathway has demonstrated extreme safety, which gives us confidence in our approach. Our focus now is to optimize treatment outcomes for the best results from CNP, and we are hopeful for insights when we present our Q4 data, which will consist of patients aged 2 to 10.

Please standby for your next question. Next question is from the line of David Lebowitz from Citibank. Your line is open.

Thank you very much for taking my question. With regard to the number of prescriptions at this point, to what extent are patients getting reimbursed overall? How many are receiving discounts through the launch at this point? Also, how long are the typical prescriptions overall?

Typically, a prescription lasts for 1 year. Most patients will receive drugs for one month. Some patients may get drugs for three months, but it is much more common to get a one-month supply. When we talk about a prescription, it essentially lasts for 1 year before it needs renewing. Our overall goal when we launched SKYTROFA was to build it as the leading brand in value. We also intended to boost the overall growth hormone market's value simultaneously. We developed our commercial launch strategy and market access strategy with several tactics to achieve this goal. Joe and his team really optimized these tactics, which show results in the data where we see the benefits of these changes. We are converting purchases more frequently from prescriptions to reimbursed supplies. Revenue recognition occurs when we sell to the system that distributes the drug. We don’t recognize revenue solely from prescriptions.

Got it. And with respect to an initial prescription, how long does it actually take until that patient becomes a full-paying customer, and do you have enough data to see how that’s evolved since launch?

We have a lot of data, and it’s evolving weekly and month-to-month. Some patients get through approval quickly, while others take longer and may not go on the free drug program or might be going through the reimbursement process through medical exceptions or appeals. But at this point, we are not willing to disclose specifics about this data. However, I can tell you that the tactics we adjusted have resulted in a quicker authorization process than we had before.

Yes, I would echo that sentiment. Being able to get approvals much quicker than before demonstrates how our tactical adjustments have been very effective.

Thanks, Joe. Scott has additional comments.

I would just say, importantly, the increase in SKYTROFA revenue from Q1 to Q2 reflects the underlying increase in reimbursed demand. You can see that acceleration based on the tactics that Joe and the team implemented.

Your next question is from the line of Li Watsek from Cantor. Your line is open.

Hey. Thanks for taking my questions. I guess I will start with TransCon CNP. Can you remind us, I guess from the Phase 2 data, what would be considered good clinical outcomes? And other than growth velocity, what other clinical outcomes should we focus on that are most relevant for these patients?

These are extremely interesting questions. From the regulatory perspective, the primary endpoint is analyzed growth velocity. Once a precision has been established, it’s tough to deviate from that perspective, which is why we focused so much on this analysis for approval. But you are 100% right; analyzed growth velocity is only an indication of effect. We want to treat the comorbidities, improve quality of life, and enhance wellness and lifespan. I am thrilled that none of the pediatric patients have dropped out of treatment over the last two years. There’s clear evidence of benefit in the trial. We will deeply analyze the data afterwards, and we’re hopeful for meaningful outcomes. We plan to initiate the 2b trial to explore additional endpoints and provide insight on the clinical evidence we can achieve with TransCon CNP.

Okay, great. Just as a follow-up, you mentioned the regulatory pathway and possibly an accelerated one. I wonder if you have any discussions with the FDA about this possibility and what the agency would like to see, as TransCon CNP seems quite safe.

I think the key element we are waiting for is the data. It’s much more productive to engage in discussions when we have the data in Q4. Right now, we can only theorize and speculate. Having the data will allow us to start a productive dialogue with regulatory agencies around the world to find the quickest route to get this unique opportunity to patients.

Jan, yes, you are absolutely right. We haven’t had any communication with the FDA yet, and our plan is to leverage the accomplished data. We are already planning the Phase 2b, and eventually, we will have two studies that will form the foundation for our discussions.

So, more to come after the data.

Your next question is from the line of Vikram Purohit from Morgan Stanley. Your line is open.

Good afternoon. Thanks for taking my question. I had one on SKYTROFA. As you have progressed now through another quarter of the launch, are you still seeing the majority of patients coming from being switch patients versus treatment-naïve patients? For patients switching over from other therapy, is there a particular agent that you are seeing the majority of patients switch from?

I think we are seeing a small majority of the patient coming from switch patients. There is no single daily growth hormone that they are coming from; it’s broadly among all daily growth hormones. Honestly, this is pretty expected because there is no notable difference between the daily growth hormones. All of them are essentially identical, so I don't see a preference for any.

Got it. That’s helpful. A follow-up question on a separate topic. For the TRANSCEND-IT-101 data that we expect to see in the third quarter, what parameters of data do you expect to report on? How are you defining success for this readout? What is the internal hurdle you are trying to meet here from this dataset?

Yes. I can start initially, and I believe Stina is on the line and she can follow-up. The TRANSCEND-IT trial, where we take our TransCon TLR7/8 agonist, is being injected inside the tumor in patients with solid tumors. Its mechanism aims to activate the immune system and provide low systemic exposure to ensure a very safe program. We have already disclosed that we show safety, the PK profile, and how we have obtained sustained release within the tumor without systemic toxicity. Our aim is also to discern clinical activity or target engagement in both injected and non-injected tumors. Stina, would you like to elaborate on this?

Thank you, Jan. At the end of Q3 this year, we expect to have a formal analysis of the Phase 1 dose-finding portion of TRANSCEND-IT-101. We expect to summarize what we have seen in dose escalation cohorts for monotherapy and combinations with pembrolizumab. This will include our PK data, clinical safety, and initial antitumor activity observations.

Vikram’s line is now closed. Our next question is from Joseph Schwartz from SVB Securities. Your line is now open.

Hi, I am Jerry, in for Joe. Thank you for taking our questions. The first one is on SKYTROFA. What factors contributed to building confidence to reach €25 million by year-end? When can we expect to see an upper bound in guidance?

We have provided a clear description of key parameters we are following through the launch. We’ve provided the revenue figures for the last two quarters, showing over 100% growth in revenue. We believe we can maintain this trajectory, thanks to continuous execution of our KPIs following the launch. We provide guidance way based on the consensus that we can reach. We don’t wish to go further with our expectations or discussions regarding our outlook at this point.

That’s helpful. Thank you. My next question is on TransCon CNP. Can you elaborate more on the Phase 2b trial that you plan to conduct? How does this fit into and complement your two Phase 2 trials? Do you have plans that go beyond the 100 micrograms per kg per week for your patients in the open-label extension study?

We have an ongoing Phase 2 trial with 100 patients mainly in Europe and the U.S., and none of these patients have dropped out. This ongoing trial provides these patients with hope and a treatment option. We are also initiating the Phase 2b trial to explore additional parameters alongside the primary endpoint of analyzed growth velocity we focus on in the current trial. Once we have the Q4 data, we will analyze it thoroughly, potentially providing insights into improving our outcomes. We want to optimize our clinical evidence through this Phase 2b trial.

This concludes today’s conference call. Thank you all for participating. You may now disconnect.